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What’s the Difference Between Medicare and Medicaid?


Updated May 22, 2014

Question: What’s the Difference Between Medicare and Medicaid?

Medicare and Medicaid are easily confused, but the differences are important. For example, if you’re making a doctor’s appointment and tell the office you have Medicaid when you really have Medicare, you might be turned away if that doctor doesn’t see Medicaid patients.

While the basic difference is that Medicare is for the elderly and Medicaid is for the poor, there’s a lot more to it. The programs differ in

  • who may enroll
  • who runs the programs
  • how the programs are designed
  • how the programs are funded
  • what benefits the programs provide

Who Gets Medicare vs Medicaid?

Old people get Medicare; poor people get Medicaid. If you’re old and poor, you can potentially get both.

You’re eligible for Medicare if you’re at least 65 years old and you or your spouse paid Medicare payroll taxes for at least 10 years. Disabled people under age 65 might also qualify for Medicare. If you’re over 65 but didn’t pay Medicare payroll taxes while you were younger, you may still be eligible for Medicare. However, you’ll likely have to pay higher Medicare premiums.

You’re eligible for Medicaid if your income falls below a certain income limit. In some states, being poor isn’t sufficient to qualify by itself; you may also have to be a child, pregnant woman, elderly person, blind, or disabled person. In other states, you qualify just because your income is less than 138 percent of federal poverty level.

Who Runs Medicare vs Medicaid?

The federal government runs the Medicare Program. Because of this, Medicare is basically the same all over the country.

Each state runs its own Medicaid program within guidelines set up by the federal government. That’s why Medicaid programs differ from state to state. Although each state designs and runs its own Medicaid program in its own way, all Medicaid programs must conform to certain minimum standards set by the federal government in order to get federal funds.

The Centers for Medicare and Medicaid Services, part of the federal government within the Department of Health and Human Services, provides oversight for Medicare as well as for every state’s Medicaid program.

How Do Program Designs Differ for Medicare vs Medicaid?

Medicare is an insurance program while Medicaid is a social welfare program.

Medicare recipients get Medicare because they paid for it through payroll taxes while they were working, and through monthly premiums once they’re enrolled.

Medicaid recipients need never have paid taxes and likely don’t pay premiums for their Medicaid insurance. Instead, taxpayers provide Medicaid to eligible needy people in a manner similar to other social welfare programs like Temporary Assistance for Needy Families, Women Infants and Children, and the Supplemental Nutrition Assistance Program.

The Medicare program is designed to give Medicare recipients multiple coverage options. Medicare is composed of several different sub-parts, each of which provides insurance for a different type of healthcare service. For example, Medicare Part A is hospitalization insurance, Medicare Part B is insurance for outpatient and doctors’ services, and Medicare Part D is prescription drug insurance. Medicare recipients may choose several different types of Medicare insurance at once, or only one type. They can choose a Medicare HMO, or original Medicare. It’s common to have Medicare Parts A, B, and D at the same time. However, some people choose only to have Medicare Part A coverage and then don’t have to pay the monthly premiums for Medicare Parts B and D.

Since Medicaid is a social welfare program, there aren’t usually a lot of choices to be made by Medicaid recipients. A Medicaid recipient may choose whether or not to apply, and whether or not to accept the Medicaid coverage they’re offered once they qualify. But, rather than having a lot of coverage options to choose among, Medicaid is more often a take-it-or-leave-it proposition.

Where do Medicare and Medicaid Get Their Money?

Medicare is funded in part by the Medicare payroll tax, in part by Medicare recipients’ premiums, and in part by general federal taxes. The Medicare payroll taxes and premiums go into the Medicare Trust Funds. Bills for healthcare services to Medicare recipients are paid from the Medicare Trust Funds.

Medicaid is partially funded by the federal government, and partially funded by each state. How much the federal government contributes toward funding each state’s Medicaid program depends on the average income of that state’s residents. The federal government generally funds 50 - 75 percent of total Medicaid expenses for each state.

How Do Medicare and Medicaid Benefits differ?

Medicare and Medicaid don’t necessarily cover the same healthcare services. For example, Medicare doesn’t pay for long-term custodial care like permanently living in a nursing home, but Medicaid does pay for long-term care. Medicaid benefits vary from state to state, but each state’s Medicaid program must provide certain minimum benefits. Medicare benefits are the same across the entire country.

You can learn more about what benefits Medicare provides, as well as what to expect for out-of-pocket expenses in this booklet. Learn more about Medicaid’s general coverage benefits here, or go to your state’s Medicaid website to learn about Medicaid benefits in your state.

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